Invesco Mortgage Capital Inc.

Note 1 –Organization and Business Operations

Invesco Mortgage Capital Inc. (the “Company” or “we”) is a Maryland corporation primarily focused on investing in, financing and managing mortgage-backed securities (“MBS”) and other mortgage-related assets.

As of December 31, 2025, we were invested in:

•residential mortgage-backed securities (“RMBS”) that are guaranteed by a U.S. government agency such as the Government National Mortgage Association (“Ginnie Mae”), or a federally chartered corporation such as the Federal National Mortgage Association (“Fannie Mae”) or the Federal Home Loan Mortgage Corporation (“Freddie Mac”) (collectively “Agency RMBS”); and

•commercial mortgage-backed securities (“CMBS”) that are guaranteed by a U.S. government agency such as Ginnie Mae or a federally chartered corporation such as Fannie Mae or Freddie Mac (collectively “Agency CMBS”).

During the periods presented in these consolidated financial statements, we also invested in CMBS and RMBS that are not guaranteed by a U.S. government agency or a federally chartered corporation (“non-Agency CMBS” and “non-Agency RMBS”, respectively), U.S. Treasury securities and real estate-related financing arrangements in the form of unconsolidated ventures.

We conduct our business through IAS Operating Partnership L.P. (the “Operating Partnership”) and haveone operating segment. We are externally managed and advised by Invesco Advisers, Inc. (our “Manager”), a registered investment adviser and an indirect, wholly-owned subsidiary of Invesco Ltd. (“Invesco”), an independent global investment management firm.

We elected to be taxed as a real estate investment trust (“REIT”) for U.S. federal income tax purposes under the provisions of the Internal Revenue Code of 1986. To maintain our REIT qualification, we are required to distribute at least 90% of our REIT taxable income to our stockholders annually, and we will generally not be subject to U.S. federal or state corporate income tax to the extent that we distribute all of our annual taxable income to our stockholders on a timely basis. It is our intention to distribute 100% of our taxable income within the time limits prescribed by the Internal Revenue Code. We operate our business in a manner that permits our exclusion from the “Investment Company” definition under the Investment Company Act of 1940, as amended (the “1940 Act”).

Note 2 –Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

Our consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and consolidate the financial statements of the Company and its controlled subsidiaries. All significant intercompany transactions, balances, revenues and expenses are eliminated upon consolidation.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. Examples of estimates include, but are not limited to, estimates of the fair values of financial instruments, interest income on mortgage-backed securities and allowances for credit losses. Actual results may differ from those estimates.

Fair Value Measurements

As described in Note 8 - “Fair Value of Financial Instruments,” we evaluate the source used to fair value our assets and liabilities and make a determination on its categorization within the fair value hierarchy. If the price of an instrument is readily available, meaning that it is a quoted price in an active market for identical assets, the instrument is classified as a level 1 measurement. If the price of an instrument is obtained from quoted prices in inactive markets for similar instruments, or whose values are model-derived but the inputs are observable either directly or indirectly, the instrument is classified as a level 2 measurement. If the inputs appear to be not observable and reflect judgment about assumptions used to value the instrument, the instrument would be classified as a level 3 measurement. Transfers between levels, if any, are determined at the end of the reporting period.

We report our MBS and derivative assets and liabilities at fair value as determined by an independent pricing service. We generally obtain one price per instrument from our primary pricing service. If the primary pricing service cannot provide a price, we will seek a value from other pricing services.

The pricing service uses two types of valuation approaches to determine the valuation of our various mortgage-backed securities: a market approach, which uses observable prices and other relevant information that is generated by market transactions involving identical or comparable assets or liabilities; and an income approach, which uses valuation techniques to convert future amounts to a single, discounted present value amount. In instances where sufficient market activity may not exist, the pricing service may utilize proprietary valuation models that may consider market transactions in comparable securities and the various relationships between securities in determining fair value and/or market characteristics to estimate relevant cash flows, which are then discounted to calculate the fair values. Observable inputs may include a combination of benchmark yields, executed trades, broker/dealer quotes, issuer spreads, bids, offers and benchmark securities. In addition, the valuation models utilized by pricing services may consider additional pool level information such as prepayment speeds, default frequencies and default severities, if applicable. We and the pricing service continuously monitor market indicators and economic events to determine whether they may have an impact on our valuations. Our MBS are classified as Level 2 measurements in the fair value hierarchy.

Our U.S. Treasury futures contracts are valued based on exchange pricing for identical instruments and classified as Level 1 measurements in the fair value hierarchy. Interest rate swaps are valued using the daily settlement price, or fair value, determined by the clearing exchange based on a pricing model that references observable market data, including current benchmark rates and the forward yield curve. The valuation methodology for to-be-announced securities forward contracts (“TBAs”) is similar to that of our Agency RMBS. Our interest rate swaps and TBAs are classified as Level 2 measurements in the fair value hierarchy.

Overrides of prices from pricing services are rare in the current market environment for the assets we hold. Examples of instances that would cause an override include if we recently traded the same security or there is an indication of market activity that would cause the pricing service price to no longer be indicative of fair value. In the rare instance where a price is adjusted, we have a control process to monitor the reason for such adjustment.

To gain comfort that pricing service prices are representative of current market information, we compare the transaction prices of security purchases and sales to the valuation levels provided by the pricing services. Price differences exceeding pre-defined tolerance levels are identified and investigated and may be challenged. Trends are monitored over time and if there are indications that the valuations are not comparable to market activity, the pricing services are asked to provide detailed information regarding their methodology and inputs. Transparency tools are also available from the pricing services which help us understand data points and/or market inputs used for pricing securities.

We also review daily price movements for interest rate swaps, U.S. Treasury futures contracts and TBAs. Price movements exceeding pre-defined tolerance levels are investigated using an alternate price from another pricing service as well as available market information. Based on our findings, the primary pricing service may be challenged, or in rare cases, overridden with an alternate pricing source.

In addition, we perform due diligence procedures on all pricing services on at least an annual basis. A questionnaire is sent to pricing services which requests information such as changes in methodologies, business recovery preparedness, internal controls and confirmation that evaluations are generated based on market data.

Mortgage-Backed Securities

We record our purchases of MBS on the trade date and report these securities at fair value as described above in the Fair Value Measurements section of this Note 2 to our consolidated financial statements. We have elected the fair value option for all of our MBS held as of December 31, 2025 (December 31, 2024: $5.4 billion or 99.7% of our MBS). Under the fair value option, we recognize changes in fair value in our consolidated statements of operations. In our view, the election more appropriately reflects the results of our operations because MBS fair value changes are accounted for in the same manner as fair value changes in our economic hedging instruments. We elected the fair value option for all MBS purchased on or after September 1, 2016.

Our MBS that were held as of December 31, 2024 for which we had not elected the fair value option were classified as available-for-sale, with unrealized gains or losses recorded in accumulated other comprehensive income, a separate component of stockholders' equity, until sale or disposition of the investment. Upon sale or disposition, the cumulative gain or loss previously reported in stockholders' equity was recognized in income.

Realized gains and losses from sales of MBS are determined based upon the specific identification method. Our interest income recognition policies for MBS is described below in the Interest Income Recognition section of this Note 2 to our consolidated financial statements.

Allowances for Credit Losses on Available-for-Sale Securities

Prior to the sale of our MBS that were classified as available-for-sale, we were required to evaluate those securities for credit losses. Allowances for credit losses were estimated based on a comparison of the investment's amortized cost basis to its discounted expected cash flows. Credit losses were recorded within (increase) decrease in provisions for credit losses in our consolidated statements of operations.

U.S. Treasury Securities

U.S. Treasury securities are classified as trading securities and reported at fair value on our consolidated balance sheets. Purchases of U.S. Treasury securities are recorded on the trade date. Changes in the fair value of U.S. Treasury securities are recognized within gain (loss) on investments, net in our consolidated statements of operations.

Interest Income Recognition

Mortgage-Backed Securities

Interest income on MBS is accrued based on the outstanding principal or notional balance of the securities and their contractual terms. Premiums or discounts are amortized or accreted into interest income over the life of the investment using the effective interest method.

For Agency MBS that cannot be prepaid in such a way that we would not recover substantially all of our initial investment, interest income recognition is based on contractual cash flows. We do not estimate prepayments in applying the effective interest method.

Interest income on our MBS where we may not recover substantially all of our initial investment is based on estimated future cash flows. We estimate future expected cash flows at the time of purchase and determine the effective interest rate based on these estimated cash flows and our purchase price. Over the life of the investments, we update these estimated future cash flows and compute a revised yield based on the current amortized cost of the investment In estimating these future cash flows, there are a number of assumptions that are subject to uncertainties and contingencies, including but not limited to the rate and timing of principal payments, the pass through or coupon rate and interest rate fluctuations. These uncertainties and contingencies are difficult to predict and are subject to future events that may impact our estimate and our interest income. Changes in our original or most recent cash flow projections may result in a prospective change in interest income recognized on these securities, or the amortized cost of these securities. For non-Agency RMBS not of high credit quality, when actual cash flows varied from expected cash flows, the difference was recorded as an adjustment to the amortized cost of the security and the security's yield was revised prospectively.

U.S. Treasury Securities

Coupon interest income on U.S. Treasury securities is accrued based on the outstanding principal balance of the securities and their contractual terms.

Cash and Cash Equivalents

We consider all highly liquid investments that have original or remaining maturity dates of three months or less when purchased to be cash equivalents. As of December 31, 2025, we had cash and cash equivalents in excess of the FDIC deposit insurance limit of $250,000 per institution. We mitigate our risk of loss by actively monitoring our counterparties.

Restricted Cash

Restricted cash represents initial margin posted on our interest rate swaps and futures contracts. Cash posted as initial margin is not available for general corporate purposes.

Due from Counterparties / Collateral Held Payable

Due from counterparties represents cash variation margin posted with our counterparties as collateral on our TBAs and repurchase agreements. Collateral held payable represents cash variation margin posted with us by counterparties as collateral on our TBAs and repurchase agreements. If we receive collateral other than cash from our counterparties under repurchase agreements, such assets are not included in our consolidated balance sheets. If we either sell such assets or pledge the assets as collateral under a repurchase agreement, the cash received and the corresponding liability are reflected on the consolidated balance sheets.

Investment Related Receivable / Investment Related Payable

Investment related receivable consists of receivables for mortgage-backed securities that we have sold but have not settled with the buyer and accrued interest and principal paydowns on mortgage-backed securities. Investment related payable consists of liabilities for mortgage-backed securities that we have purchased but have not settled with the seller.

We have financed our purchases of mortgage-backed securities primarily through the use of repurchase agreements. Repurchase agreements are treated as collateralized financing transactions and are carried at their contractual amounts, including accrued interest that is recorded as accrued interest payable in our consolidated balance sheets, as specified in the respective agreements.

We record the mortgage-backed securities and the related repurchase agreement financing on a gross basis in our consolidated balance sheets, and the corresponding interest income and interest expense on a gross basis in our consolidated statements of operations.

Dividends Payable

Dividends payable represent dividends declared at the balance sheet date that are payable to common stockholders and/or preferred stockholders.

Earnings (Loss) per Share

We calculate basic earnings (loss) per share by dividing net income (loss) attributable to common stockholders for the period by the weighted-average number of shares of our common stock outstanding for that period. Diluted earnings per share takes into account the effect of dilutive instruments, such as unvested restricted stock awards, and uses the average share price for the period in determining the number of incremental shares that are to be added to the weighted-average number of shares outstanding.

Share-Based Compensation

Under the terms of our amended and restated 2009 Equity Incentive Plan (the “Incentive Plan”), our independent directors are eligible to receive stock awards as part of their compensation for serving as directors, In addition, we may compensate the officers and employees of our Manager and its affiliates under the Incentive Plan under the terms of our management agreement.

Share-based compensation arrangements may include share options, restricted and non-restricted share awards, performance-based awards and share appreciation rights. Compensation related to stock awards is recognized in the consolidated financial statements based on the fair value of the equity or liability instruments issued on the date of grant.

Underwriting Commissions and Offering Costs

Underwriting commissions and direct costs incurred in connection with our common and preferred stock offerings are recorded as a reduction of additional paid in capital and preferred stock, respectively.

Comprehensive Income

Our comprehensive income consists of net income, as presented in the consolidated statements of operations, adjusted as appropriate for items such as unrealized gains and losses on available-for-sale MBS; reclassification of unrealized gains and losses upon sale of available-for-sale MBS to gain (loss) on investments, net; reclassification of unrealized losses on available-for-sale securities to (increase) decrease in provision for credit losses; reclassification of amortization of net deferred gains and losses on de-designated interest rate swaps to repurchase agreements interest expense and currency translation adjustments on an investment in an unconsolidated venture. Unrealized gains and losses on available-for-sale MBS were reclassified into net income upon their sale.

Accounting for Derivative Financial Instruments

We record all derivatives on our consolidated balance sheets at fair value. At the inception of a derivative contract, we determine whether the instrument will be part of a qualifying hedge accounting relationship or whether we will account for the contract as a trading instrument. We have elected not to apply hedge accounting to all new derivative contracts entered into after January 1, 2014. Changes in the fair value of our derivatives are recorded in gain (loss) on derivative instruments, net in our consolidated statements of operations. Net interest paid or received under our interest rate swaps is also recognized in gain

(loss) on derivative instruments, net in our consolidated statements of operations. Cash receipts or payments that are attributed to contractual interest earned or incurred on interest rate swaps are classified as cash flows from operating activities in our consolidated statements of cash flows. All other cash flows from derivatives are generally recorded as investing cash flows in our consolidated statements of cash flows.

Before 2014, we applied hedge accounting to our interest rate swap agreements. Effective December 31, 2013, we voluntarily discontinued hedge accounting for our interest rate swap agreements by de-designating the interest rate swaps as cash flow hedges. Amounts recorded in accumulated other comprehensive income (loss) (“AOCI”) before we discontinued cash flow hedge accounting for our interest rate swaps were reclassified to interest expense on repurchase agreements on the consolidated statements of operations as interest was accrued and paid on the related repurchase agreements over the remaining original life of the interest rate swap agreements.

We evaluate the terms and conditions of our U.S. Treasury futures contracts, currency forward contracts and TBAs to determine if an instrument has the characteristics of an investment or should be considered a derivative under U.S. GAAP. Accordingly, U.S. Treasury futures contracts, currency forward contracts and TBAs having the characteristics of derivatives are accounted for at fair value with such changes recognized in gain (loss) on derivative instruments, net in the consolidated statements of operations.

The fair value of interest rate swaps, U.S. Treasury futures contracts, currency forward contracts and TBAs is included in derivative assets or derivative liabilities on the consolidated balance sheets. Daily variation margin received or paid on interest rate swaps and U.S. Treasury futures contracts is accounted for as settlement of the derivative itself rather than as collateral and is recorded as a reduction in the corresponding derivative asset or derivative liability.

Income Taxes

We elected to be taxed as a REIT. Accordingly, we will generally not be subject to U.S. federal and applicable state and local corporate income tax to the extent that we make qualifying distributions to our stockholders, and provided we satisfy on a continuing basis, through actual investment and operating results, the REIT requirements including certain asset, income, distribution and stock ownership tests. If we fail to qualify as a REIT and do not qualify for certain statutory relief provisions, we will be subject to U.S. federal, state and local income taxes and may be precluded from qualifying as a REIT for the four taxable years following the year in which we lost our REIT qualification. Accordingly, our failure to qualify as a REIT could have a material adverse impact on our results of operations and amounts available for distribution to stockholders.

Our dividends paid deduction for qualifying dividends to our stockholders is computed using our REIT taxable income as opposed to net income reported on the consolidated financial statements. REIT taxable income will generally differ from net income because the determination of REIT taxable income is based on tax regulations and not financial accounting principles. We did not incur an income tax liability for the years ended December 31, 2024 and 2023 and do not expect to incur an income tax liability for the year ended December 31, 2025. Accordingly, our effective tax rate was 0% and we did not pay any income tax.

We have net operating loss carryforwards that do not expire and capital loss carryforwards that expire five years after the fiscal tax years in which they were created. We do not recognize our net operating loss carryforwards or capital loss carryforwards as deferred tax assets on our consolidated balance sheets because we do not expect to incur income taxes.

We have elected to treatone of our subsidiaries as a taxable REIT subsidiary (“TRS”). In general, a TRS may hold assets and engage in activities that we cannot hold or engage in directly and generally may engage in any real estate or non-real estate-related business. A TRS is subject to U.S. federal, state and local corporate income taxes. Our TRS did not generate taxable income for the years ended December 31, 2025, 2024 and 2023.

We do not have any accruals for uncertain tax positions. Our tax returns for tax years 2022 and forward are open to examination by the IRS. We would recognize interest and penalties, if any, as income tax expense, which would be included in general and administrative expenses.

Recently Issued Accounting Pronouncements

In November 2024, the Financial Accounting Standards Board issued an accounting standard requiring public business entities to disclose disaggregated information about certain income statement line items. Public business entities are required to disclose purchases of inventory, employee compensation, depreciation, intangible asset amortization and depletion for each income statement line item that contains those expenses. Specified expenses, gains or losses that are already disclosed under existing U.S. GAAP are required to be included in the disaggregated income statement expense line item disclosures, and any remaining amounts need to be described qualitatively. Separate disclosures of total selling expenses and an entity’s definition of those expenses are also required. The guidance does not change what an entity presents on the face of its income statement.

We are required to implement the new standard prospectively in our consolidated financial statements for the year ended December 31, 2027 and for interim periods thereafter. We may implement the new standard retrospectively, and early adoption is permitted. We are currently evaluating the impact of the new standard.

We reviewed all other recently issued accounting standards updates and determined that they were not expected to have a significant impact on our consolidated financial statements when adopted or did not have a significant impact on our consolidated financial statements upon adoption.

Note 3 –Mortgage-Backed Securities

The following tables summarize our MBS portfolio by asset type as of December 31, 2025 and 2024.

(1)Period-end weighted average yield is based on amortized cost as of December 31, 2025 and incorporates future prepayment and loss assumptions when appropriate. Total represents period-end weighted average yield of all mortgage-backed securities.

(2)All Agency collateralized mortgage obligations (“Agency CMO”) are interest-only securities (“Agency IO”).

(1)Period-end weighted average yield is based on amortized cost as of December 31, 2024 and incorporates future prepayment and loss assumptions when appropriate. Total represents period-end weighted average yield of all mortgage-backed securities.

(2)All Agency CMO are Agency IO.

(3)Non-Agency RMBS is 66.4% fixed rate,33.0% variable rate and 0.6% floating rate based on fair value. Coupon payments on variable rate investments are based upon changes in the underlying hybrid adjustable-rate mortgage loan coupons, while coupon payments on floating rate investments are based upon a spread to a reference index.

(4)Of the total discount in non-Agency RMBS, $2.1 million is non-accretable calculated using the principal/notional balance and based on estimated future cash flows of the securities.

(5)Non-Agency RMBS includes interest-only securities (“non-Agency IO”) which represent 96.7% of principal/notional balance,34.2% of amortized cost and 31.0% of fair value.

We have elected the fair value option for all of our MBS held as of December 31, 2025. The following table presents the fair value of our available-for-sale securities and securities accounted for under the fair value option by asset type as of December 31, 2024.

The components of the carrying value of our MBS portfolio as of December 31, 2025 and 2024 are presented below. Accrued interest receivable on our MBS portfolio, which is recorded within investment related receivable on our consolidated balance sheets, was $27.8 million as of December 31, 2025 (December 31, 2024: $24.9 million).

(1)Gross unrealized gains and losses includes gains (losses) recognized in net income for securities accounted for under the fair value option as well as, solely with respect to December 31, 2024, gains (losses) for available-for-sale securities which were recognized as adjustments to other comprehensive income. Realization occurred upon sale or settlement of such securities. Further detail on the components of our total gains (losses) on investments, net for the years ended December 31, 2025 and 2024 is provided below in this Note 3.

The following table summarizes our MBS portfolio according to estimated weighted average life classifications as of December 31, 2025 and 2024.

The following tables present the estimated fair value and gross unrealized losses of our MBS by length of time that such securities have been in a continuous unrealized loss position as of December 31, 2025 and 2024.

(1)Fair value option has been elected for all securities in an unrealized loss position.

(1)Fair value option has been elected for all Agency securities in an unrealized loss position.

(2)Unrealized losses on non-Agency CMBS were included in accumulated other comprehensive income. These losses were not reflected in an allowance for credit losses based on a comparison of discounted expected cash flows to current amortized cost basis.

(3)Includes non-Agency IO with a fair value of $1.1 million for which the fair value option has been elected. Such securities have unrealized losses of $231,000.

We were required to evaluate our available-for-sale MBS for credit losses. During the year ended December 31, 2025, we sold our remaining available-for-sale MBS for cash proceeds of $15.1 million and recognized net gains upon sale of $402,000. We didnot sell any available-for-sale MBS during the years ended December 31, 2024 or 2023. The following table presents a roll-forward of our allowance for credit losses.

The following table summarizes the components of our total gain (loss) on investments, net for the years ended December 31, 2025, 2024 and 2023.

The following tables present components of interest income recognized on our mortgage-backed and other securities portfolio for the years ended December 31, 2025, 2024 and 2023.

Note 4 –Borrowings

We finance the majority of our investment portfolio through repurchase agreements. Our repurchase agreements bear interest at a contractually agreed upon rate and generally have maturities ranging fromone tosix months. We account for our repurchase agreements as secured borrowings since we maintain effective control of the financed assets. Our repurchase agreements are subject to certain financial covenants. We were in compliance with all of these covenants as of December 31, 2025 and 2024.

The following table summarizes certain characteristics of our borrowings as of December 31, 2025 and 2024. Refer to Note 5 - “Collateral Positions” for collateral pledged and held under our repurchase agreements.

Note 5 –Collateral Positions

The following table summarizes the fair value of collateral that we pledged and held under our repurchase agreements and derivative instruments as of December 31, 2025 and 2024. Refer to Note 2 - “Summary of Significant Accounting Policies - Fair Value Measurements” for a description of how we determine fair value. Agency RMBS and Agency CMBS collateral pledged is included in mortgage-backed securities on our consolidated balance sheets. Cash collateral pledged on centrally cleared interest rate swaps and U.S. Treasury futures contracts is classified as restricted cash on our consolidated balance sheets. Cash collateral pledged on TBAs accounted for as derivatives is classified as due from counterparties on our consolidated balance sheets.

Cash collateral held that is not restricted for use is included in cash and cash equivalents on our consolidated balance sheets and the liability to return the collateral is included in collateral held payable. Non-cash collateral held is only recognized if the counterparty defaults or if we sell the pledged collateral. As of December 31, 2025 and 2024, we did not hold any cash or non-cash collateral.

Collateral pledged with our repurchase agreement counterparties is segregated in our books and records. The repurchase agreement counterparties have the right to resell and repledge the collateral posted but have the obligation to return the pledged collateral, or substantially the same collateral if agreed to by us, upon maturity of the repurchase agreement. Under the repurchase agreements, the respective lender retains the contractual right to mark the underlying collateral to fair value. We would be required to provide additional collateral to fund margin calls if the value of pledged assets declined. We intend to maintain a level of liquidity that will enable us to meet any reasonably anticipated margin calls.

The ratio of our total repurchase agreements collateral pledged to our total repurchase agreements outstanding was 105% as of December 31, 2025 (December 31, 2024:105%) based on the fair value of the securities as reported in our consolidated balance sheets.

Interest Rate Swaps

As of December 31, 2025 and 2024, all of our interest rate swaps were centrally cleared by the Chicago Mercantile Exchange (“CME”), a registered clearing organization, through a Futures Commission Merchant (“FCM”). We are required to pledge initial margin and daily variation margin for our centrally cleared interest rate swaps that is based on the fair value of our contracts as determined by our FCM. Collateral pledged with our FCM is segregated in our books and records and can be in the form of cash or securities. Daily variation margin for centrally cleared interest rate swaps is characterized as settlement of the derivative itself rather than collateral and is recorded as gain (loss) on derivative instruments, net in our consolidated statements of operations. Certain of our FCM agreements include cross default provisions.

U.S. Treasury Futures Contracts

We are required to pledge initial margin and daily variation margin for our U.S. Treasury futures contracts that is based on the fair value of our contracts as determined by our FCM. The daily variation margin payment for our U.S. Treasury futures contracts is characterized as settlement of the U.S. Treasury futures contract itself rather than collateral and is recorded as gain (loss) on derivative instruments, net in our consolidated statement of operations.

TBAs

Our TBAs provide for bilateral collateral pledging based on market value as determined by our counterparties. Collateral pledged with our TBA counterparties is segregated in our books and records and can be in the form of cash or securities. Our counterparties have the right to repledge the collateral posted and have the obligation to return the pledged collateral, or substantially the same collateral, if agreed to by us, as the market value of the contracts changes.

Note 6 –Derivatives and Hedging Activities

Risk Management Objective of Using Derivatives

We are exposed to certain risks arising from both our business operations and economic conditions. We principally manage our exposures to a wide variety of business and operational risks through management of our core business activities. We manage economic risks, including interest rate, liquidity and credit risk primarily by managing the amount, sources, and duration of our investments, borrowings, and the use of derivative financial instruments. Specifically, we use derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. Our derivative financial instruments are used to manage differences in the amount, timing, and duration of our known or expected cash receipts and our known or expected cash payments principally related to our investments and borrowings.

The following table summarizes changes in the notional amount of our derivative instruments during 2025.

Refer to Note 5 - “Collateral Positions” for further information regarding our collateral pledged to and received from our derivative counterparties.

Interest Rate Swaps

At each settlement date, we typically refinance each repurchase agreement at the market interest rate at that time. Our objectives in using interest rate derivatives are to manage our exposures to interest rate movements and to add stability to our borrowings costs. To accomplish these objectives, we primarily use interest rate swaps and U.S. Treasury futures contracts as part of our interest rate risk management strategy. Under the terms of our interest rate swap contracts, we make fixed-rate payments to a counterparty in exchange for the receipt of floating-rate amounts over the life of the agreements without exchange of the underlying notional amount. To a lesser extent, we have in the past entered into and may in the future enter into interest rate swap contracts whereby we make floating-rate payments to a counterparty in exchange for the receipt of fixed-rate amounts as part of our overall risk management strategy.

In 2013, we discontinued cash flow hedge accounting for our interest rate swaps. Amounts recorded in accumulated other comprehensive income before we discontinued cash flow hedge accounting for our interest rate swaps were reclassified to interest expense on the consolidated statements of operations as interest was accrued and paid on the related repurchase agreements over the remaining life of the interest rate swap agreements. We reclassified $10.4 million as a decrease to interest expense during the year ended December 31, 2023. As of December 31, 2025 and 2024, there wereno gains or losses on discontinued cash flow hedges remaining in accumulated other comprehensive income.

As of December 31, 2025 and 2024, we had interest rate swaps whereby we pay fixed interest rates and receive floating interest rates based on the secured overnight financing rate (“SOFR”) with the following maturities outstanding.

U.S. Treasury Futures Contracts

We use U.S. Treasury futures contracts to help mitigate the potential impact of changes in interest rates on our performance. The table below presents certain details of our U.S. Treasury futures contracts as of December 31, 2025 and 2024.

TBAs

TBAs are forward contracts for the purchase or sale of Agency RMBS that specify the price, issuer, term and coupon of the securities to be delivered, but the actual securities are not identified until shortly before the TBA settlement date. Our primary use of TBAs that we do not intend to physically settle has been in long positions as an alternative means of investing in and financing Agency RMBS. During the second quarter of 2025, we used short positions in TBAs to manage risk and economically hedge a portion of our exposure to changes in Agency RMBS valuations.

The table below presents certain characteristics of our TBAs accounted for as derivatives as of December 31, 2024. We did not have any TBAs outstanding as of December 31, 2025.

(1)Derivative assets and derivative liabilities related to TBAs are presented gross on the consolidated balance sheets.

Tabular Disclosure of the Effect of Derivative Instruments on the Balance Sheets

The table below presents the fair value of our derivative financial instruments, as well as their classification on our consolidated balance sheets as of December 31, 2025 and 2024.

Tabular Disclosure of the Effect of Derivative Instruments on the Income Statement

The following tables summarize the effect of interest rate swaps, U.S. Treasury futures contracts, TBAs and currency forward contracts reported in gain (loss) on derivative instruments, net on the consolidated statements of operations for the years ended December 31, 2025, 2024 and 2023.

Note 7 –Offsetting Assets and Liabilities

Certain of our repurchase agreements and derivative transactions are governed by underlying agreements that generally provide for a right of offset under master netting arrangements (or similar agreements) in the event of default or in the event of bankruptcy of either party to the transactions. Assets and liabilities subject to such arrangements are presented on a gross basis in the consolidated balance sheets.

The following tables present information about the assets and liabilities that are subject to master netting arrangements (or similar agreements) and can potentially be offset on our consolidated balance sheets as of December 31, 2025 and December 31, 2024. The daily variation margin payments for centrally cleared interest rate swaps and U.S. Treasury futures contracts are characterized as settlement of the derivative itself rather than collateral. Our derivative assets of $2.2 million related to centrally cleared interest rate swaps and $2.2 million related to U.S. Treasury futures contracts as of December 31, 2025 (December 31, 2024: assets of $1.5 million and $3.5 million related to centrally cleared interest rate swaps and U.S. Treasury futures contracts, respectively) are not included in the table below as a result of this characterization of daily variation margin.

As of December 31, 2025

As of December 31, 2024

(1)The fair value of securities pledged against our borrowings under repurchase agreements was $5.9 billion as of December 31, 2025 (December 31, 2024: $5.1 billion). We heldno cash collateral under repurchase agreements as of December 31, 2025 or December 31, 2024. Gross amounts not offset are limited to the net amount of repurchase agreement liabilities presented sufficient to reduce the net amount to zero for each counterparty.

(2)Amounts represent derivative assets and derivative liabilities which could potentially be offset against other derivative assets, derivative liabilities and cash collateral pledged or received.

(3)Cash collateral pledged by us on our derivatives was $110.4 million as of December 31, 2025 (December 31, 2024: $138.1 million) of which $110.4 million relates to initial margin pledged on centrally cleared interest rate swaps and U.S. Treasury futures contracts (December 31, 2024: $137.5 million). Centrally cleared interest rate swaps and U.S. Treasury futures contracts are excluded from the tables above. We held no cash collateral on our derivatives as of December 31, 2025 or December 31, 2024.

Note 8 –Fair Value of Financial Instruments

A three-level valuation hierarchy exists for disclosure of fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions. The three levels are defined as follows:

•Level 1 Inputs – Quoted prices for identical instruments in active markets.

•Level 2 Inputs – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

•Level 3 Inputs – Instruments with primarily unobservable value drivers.

The following tables present our assets and liabilities measured at fair value on a recurring basis.

(1)For more detail about the fair value of our MBS, refer to Note 3 - “Mortgage-Backed Securities”.

(2)Derivative assets and derivative liabilities include U.S. Treasury futures contracts as Level 1 measurements and interest rate swaps and TBAs as Level 2 measurements.

The following table presents the carrying value and estimated fair value of our financial instruments that are not carried at fair value on the consolidated balance sheets as of December 31, 2025 and December 31, 2024.

The estimated fair value of repurchase agreements is a Level 3 fair value measurement based on an expected present value technique. This method discounts future estimated cash flows using rates we determined best reflect current market interest rates that would be offered for repurchase agreements with similar characteristics and credit quality.

Note 9 –Related Party Transactions

Our Manager is at all times subject to the supervision and oversight of our board of directors and has only such functions and authority as we delegate to it. Under the terms of our management agreement, our Manager and its affiliates provide us with our management team, including our officers and appropriate support personnel. Each of our officers is an employee of our Manager or one of its affiliates. We do not have any employees. Our Manager is not obligated to dedicate any of its employees exclusively to us, nor is our Manager obligated to dedicate any specific portion of time to our business. The costs of support personnel provided by our Manager reimbursed or reimbursable by us for the year ended December 31, 2025 were $1.2 million (2024: $1.5 million; 2023: $1.6 million).

When cash collateral is received from counterparties under repurchase agreement borrowings, it is generally invested in a

money market fund for which our Manager serves as the investment adviser. These investments are included in cash and cash equivalents and the liability to return the collateral is included in collateral held payable on our consolidated balance sheets.

Management Fee

We pay our Manager a fee equal to 1.50% of our stockholders' equity per annum. For purposes of calculating the management fee, stockholders' equity is calculated as average month-end stockholders' equity for the prior calendar quarter as determined in accordance with U.S. GAAP. Stockholders' equity may exclude one-time events due to changes in U.S. GAAP and certain non-cash items upon approval by a majority of our independent directors.

During the periods presented in these consolidated financial statements, we did not pay any management fees on our investments in unconsolidated ventures that were managed by an affiliate of our Manager.

Expense Reimbursement

We are required to reimburse our Manager for operating expenses incurred on our behalf, including directors and officers insurance, accounting services, auditing and tax services, legal services, filing fees, and miscellaneous general and administrative costs. Our reimbursement obligation is not subject to any dollar limitation.

The following table summarizes the costs incurred on our behalf by our Manager for the years ended December 31, 2025, 2024 and 2023.

Termination Fee

If we elect to terminate our management agreement other than for cause, we owe our Manager a termination fee equal tothree times the sum of our average annual management fee during the 24-month period before termination, calculated as of the end of the most recently completed fiscal quarter.

Note 10 –Stockholders’ Equity

Preferred Stock

In May 2022, our board of directors approved a share repurchase program for our Series B and Series C Preferred Stock. During the year ended December 31, 2025, we repurchased and retired 352,528 shares of Series C Preferred Stock. During the year ended December 31, 2024, we repurchased and retired 138,008 shares of Series B Preferred Stock prior to redemption and 338,780 shares of Series C Preferred Stock. As of December 31, 2025, we had authority to repurchase 354,131 additional shares of our Series C Preferred Stock under the current preferred stock share repurchase program.

On December 27, 2024, we redeemed all issued and outstanding shares of our Series B Preferred Stock for $106.2 million. The cash redemption price for each share of Series B Preferred Stock was $25.00. The excess of the consideration transferred over carrying value was accounted for as a deemed dividend and resulted in a reduction of $3.5 million in net income attributable to common stockholders for the year ended December 31, 2024. Prior to redemption, holders of our Series B Preferred Stock were entitled to receive dividends at an annual rate of 7.75% of the liquidation preference of $25.00 per share or $1.9375 per share per annum. Dividends were cumulative and payable quarterly in arrears.

Holders of our Series C Preferred Stock are entitled to receive dividends at an annual rate of 7.50% of the liquidation preference of $25.00 per share or $1.875 per share per annum until September 27, 2027. After September 27, 2027, holders are entitled to receive dividends at a floating rate equal to three-month CME Term SOFR and the applicable credit spread adjustment (0.26161%) plus a spread of 5.289% of the $25.00 liquidation preference per annum. Dividends are cumulative and payable quarterly in arrears.

We have the option to redeem shares of our Series C Preferred Stock on or after September 27, 2027 for $25.00 per share, plus any accumulated and unpaid dividends through the date of the redemption. Shares of Series C Preferred Stock are not redeemable, convertible into or exchangeable for any other property or any other securities of the Company before that time, except under circumstances intended to preserve our qualification as a REIT or upon the occurrence of a change in control.

Common Stock

As of December 31, 2025, we had 19,538,020 shares of our common stock remaining available for sale from time to time in at-the-market or privately negotiated transactions under our equity distribution agreement with placement agents. These shares are registered with the SEC under our shelf registration statement (as amended and/or supplemented). The table below shows issuances of our common stock under equity distribution agreements during the years ended December 31, 2025 and 2024.

During the years ended December 31, 2025 and 2024, we did not repurchase any shares of our common stock. As of December 31, 2025, we had authority to repurchase 1,816,359 shares of our common stock through our common stock share repurchase program.

During the year ended December 31, 2025, we granted 77,108 restricted shares of common stock, net of forfeitures due to retirement, to our independent directors (2024:64,969 restricted shares; 2023:45,567 restricted shares). Restricted shares become unrestricted shares of common stock on the first anniversary of the grant date unless forfeited, subject to certain conditions that accelerate vesting.

Accumulated Other Comprehensive Income

Changes in the balance of our accumulated other comprehensive income during the years ended December 31, 2025 and 2024 related solely to gains and losses on MBS that were not accounted for under the fair value option. The following table presents the components of total other comprehensive income (loss) and accumulated other comprehensive income for 2023.

Amounts recorded in AOCI before we discontinued cash flow hedge accounting for our interest rate swaps were reclassified to interest expense on the consolidated statements of operations as interest was accrued and paid on the related repurchase agreements over the remaining original life of the interest rate swap agreements.

The table below summarizes the dividends we declared during 2025 and 2024. All dividends are characterized as ordinary income in the fiscal tax year in which they were declared.

Note 11 –Earnings (Loss) per Common Share

Earnings (loss) per share for the years ended December 31, 2025, 2024 and 2023 is calculated as follows.

There wereno antidilutive shares that were excluded from the calculation of diluted earnings per share during the years ended December 31, 2025 and 2024 (December 31, 2023:944 shares excluded related to restricted stock awards).

Note 12 -Segment Information

We manage our operations on a consolidated basis and our investment strategy and management approach are focused on allocating resources and assessing the performance of our investment portfolio in total. Accordingly, we have a single operating segment. We generate interest income on our investments in MBS and other real estate-related assets. The majority of our investments are fixed-rate Agency MBS with principal and interest that are guaranteed by a U.S. government agency or a federally chartered corporation. All of our interest income and assets are attributed to the United States.

Our chief operating decisions makers (“CODMs”) are our officers that serve as members of our investment committee, which includes our Chief Executive Officer, Chief Investment Officer, Chief Operating Officer, Chief Financial Officer and President. The CODMs use net income (loss) to assess performance and make decisions about capital allocation and our portfolio composition, including our allocation to certain investment types, amount of borrowings and hedging activities.

The accounting policies of the segment are the same as those described in Note 2 “Summary of Significant Accounting Policies”. Total segment net income (loss) and total segment assets are the same as total net income (loss) and total assets as reported on our consolidated statements of operations and consolidated balance sheets, respectively. We regularly report interest expense, management fees and general and administrative expenses as separately presented on our consolidated statements of operations to our CODMs.

Note 13 –Commitments and Contingencies

Commitments and contingencies may arise in the ordinary course of business. As of December 31, 2025, we were not aware of any reported or unreported contingencies.

Note 14 –Subsequent Events

Common Stock Issuances

Between January 1, 2026 and February 23, 2026, we issued 11,480,000 shares of common stock in at-the-market transactions under our equity distribution agreement with placement agents for cash proceeds, net of fees paid to placement agents, of $98.7 million.

On January 15, 2026, we declared a common stock dividend of $0.12 per share paid on February 13, 2026 to stockholders of record at the close of business on January 26, 2026.

On February 13, 2026, we declared a common stock dividend of $0.12 per share payable on March 13, 2026 to stockholders of record at the close of business on February 24, 2026.

On February 18, 2026, we declared a Series C Preferred Stock dividend of $0.46875 per share payable on March 27, 2026 to our stockholders of record at the close of business on March 5, 2026.